Estate Planning Common Questions |
What is the applicable exclusion amount?
Answer:
The applicable exclusion amount (formerly known as the unified credit) exempts a certain amount of gifts made during your life from federal gift tax and exempts a certain amount of your estate from federal estate tax. In other words, if you are a U.S. citizen or resident, you will be able to leave a certain amount of your property free from gift tax or estate tax. The gift tax applicable exclusion amount is $1 million.
Here is the current table for the estate tax applicable exclusion amount:
|
Estates of those who die during: |
The applicable exclusion amount is: |
|
2007 and 2008 |
$2 million |
|
2009 |
$3.5 million |
|
2010 |
Estate tax is scheduled to be repealed |
|
2011 and thereafter |
$1 million (estate tax is scheduled to be reinstated) |
Keep in mind that the applicable exclusion amount for gift tax purposes remains fixed at $1 million even though the applicable exclusion amount for estate tax purposes is increasing through 2009. Any portion of the applicable exclusion amount used for gift tax purposes effectively reduces the applicable exclusion amount that will be available for estate tax purposes. In addition, although estate tax is scheduled to be repealed in the year 2010, the gift tax will remain in effect.
It is especially important for spouses to understand the applicable exclusion amount. Without advance planning, the applicable exclusion amount of the first spouse to die may be lost. It is wise to seek advice from an experienced estate planning attorney so that each spouse can make maximum use of the shelter that the applicable exclusion amount provides.
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- How can I determine what my business is worth for estate and gift tax purposes?
- I just made a gift. Do I have to file a gift tax return?
- What is the applicable exclusion amount?
- I intend to make tuition payments directly to my grandchild's college, and I know this will reduce my estate. But would it be better to contribute to a 529 plan instead?
- The death benefit from insurance on my life will be paid to an irrevocable life insurance trust (ILIT). What if those funds are needed to pay my estate taxes?
- Will the value of my 529 account be included in my estate or my beneficiary's estate?
